Nikkei slips as nuclear and supply concerns sour mood

By Ayai Tomisawa and Antoni Slodkowski

TOKYO (Reuters) – The Nikkei average nudged lower on Monday after reports of soaring radiation levels at a damaged nuclear plant, with the benchmark tethered in a narrow range for over a week, supported by ex-dividend date buying and bargain-hunting by foreigners and short-term investors.

Slow progress at the nuclear power plant added to investor worries over disrupted supply chains and power cuts already biting into corporate earnings after Japan’s massive earthquake and tsunami this month.

Domestic players off-loaded holdings in Tokyo stocks or have already closed positions ahead of the end of the fiscal year on March 31, putting the market under more selling pressure.

“There’s still room to rise as foreign buying on dips is likely to continue, although trading may be directionless before the end of the fiscal year,” said Hajime Nakajima, a wholesale trader at Cosmo Securities.

The benchmark Nikkei (.N225: Quote, Profile, Research) ended the day down 0.6 percent or 57.60 points at 9,478.53. The broader Topix (.TOPX: Quote, Profile, Research) inched up 0.05 percent to 857.85.

Japanese shares have lost 7.6 percent since the earthquake, tsunami and threat of a nuclear disaster triggered the biggest two-day rout on the market since 1987. In comparison, MSCI’s index of Asian shares outside Japan (.MIAPJ0000PUS: Quote, Profile, Research) has fallen 2.5 percent since the quake.

Underscoring worries that Japan is in for a long fight to contain the radiation threat from the stricken Fukushima nuclear plant on its northeast coast, readings on Sunday showed contamination 100,000 times normal in water at the plant’s reactor No.2 and 1,850 times normal in seawater nearby.

Tokyo Electric Power Co (TEPCO) (9501.T: Quote, Profile, Research) nosedived 17.7 percent to 696 yen on Monday, following the reports.

But some analysts said bargain-hunting by foreigners could help the Nikkei in the long term, as Japan stocks are still oversold, with the benchmark trading about 6 percent below its 25-day moving average of 10,061.

“Although investors are alert to news flows related to changes in companies’ full-year forecasts and dividend payouts, the fundamental mood should not be that bad thanks to foreign buying,” said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.

Before the market opened on Monday, foreigners placed orders to buy a net 14.9 million shares, the ninth consecutive day of pre-market block buying.

Overseas investors bought a net 891 billion yen ($11 billion) of Japanese stocks in the week following the quake, the highest since records began in 2005.

Tokyo Gas (9531.T: Quote, Profile, Research) surged 4.1 percent to 379 yen after the company hiked its net profit forecast for this business year to 98 billion yen from 71 billion yen on a jump in

demand from factories in January and February and an increase in gas use by households due to a cold winter.

‘MARKETS HATE UNCERTAINTY’

Worries over disrupted supply chains of automakers and DRAM chipmakers further soured the mood, with Deutsche Securities slashing its forecasts for major Japanese carmakers assuming a prolonged production suspension after the quake.

Automakers have underperformed the Nikkei in the two weeks following the quake, with Nissan Motor (7201.T: Quote, Profile, Research) losing 12 percent, and Toyota Motor Corp (7203.T: Quote, Profile, Research) and Honda Motor (7267.T: Quote, Profile, Research) both more than 8 percent lower.

“Markets hate uncertainty. Two weeks on, most assembly factories remain shut, and it’s become increasingly apparent that the industry will take a long but as yet undefined period to get back on its feet due to supply chain disruption,” Clive Wiggins, an analyst at Macquarie Securities, said in a note to clients.

“This open-endedness has fueled fears for the worst, resulting in valuation compression.”

Bucking the downdraft, JFE Holdings Inc (5411.T: Quote, Profile, Research) climbed 1.5 percent to 2,399 yen after the Nikkei business daily reported that its unit JFE Steel Corp will boost output of materials for temporary housing by about 70 percent by extending operating hours at a Kobe facility that makes lightweight steel H-beams.

(Editing by Chris Gallagher)

Nikkei slips as nuclear and supply concerns sour mood